New Search
reviewed periodically to determine if circumstances have changed and other options are <br />available. <br />b. Rental costs under “sale and lease back” arrangements are allowable only up to the amount <br />that would be allowed had the governmental unit continued to own the property. This amount <br />would include expenses such as depreciation or use allowance, maintenance, taxes, and <br />insurance. <br />c. Rental costs under "less-than-arms-length" leases are allowable only up to the amount (as <br />explained in Attachment B, section 37.b) that would be allowed had title to the property vested <br />in the governmental unit. For this purpose, a less-than-arms-length lease is one under which one <br />party to the lease agreement is able to control or substantially influence the actions of the other. <br />Such leases include, but are not limited to those between (i) divisions of a governmental unit; (ii) <br />governmental units under common control through common officers, directors, or members; and <br />(iii) a governmental unit and a director, trustee, officer, or key employee of the governmental <br />unit or his immediate family, either directly or through corporations, trusts, or similar <br />arrangements in which they hold a controlling interest. For example, a governmental unit may <br />establish a separate corporation for the sole purpose of owning property and leasing it back to the <br />governmental unit. <br />d. Rental costs under leases which are required to be treated as capital leases under GAAP are <br />allowable only up to the amount (as explained in subsection b) that would be allowed had the <br />governmental unit purchased the property on the date the lease agreement was executed. The <br />provisions of Financial Accounting Standards Board Statement 13, Accounting for Leases, shall <br />be used to determine whether a lease is a capital lease. Interest costs related to capital leases are <br />allowable to the extent they meet the criteria in Attachment B, section 23. Unallowable costs <br />include amounts paid for profit, management fees, and taxes that would not have been incurred <br />had the governmental unit purchased the facility. <br />38. Royalties and other costs for the use of patents. <br />a. Royalties on a patent or copyright or amortization of the cost of acquiring by purchase a <br />copyright, patent, or rights thereto, necessary for the proper performance of the award are <br />allowable unless: <br /> (1) The Federal Government has a license or the right to free use of the patent or copyright. <br />(2) The patent or copyright has been adjudicated to be invalid, or has been administratively <br />determined to be invalid. <br />(3) The patent or copyright is considered to be unenforceable. <br /> (4) The patent or copyright is expired. <br /> b. Special care should be exercised in determining reasonableness where the royalties may have <br />36 <br /> <br />